High-speed train project: Alstom demands US$16M

By Carlos Burgueño

The high-speed train could be a headache for the Fernández de Kirchner's administration. In the next few hours, large French multinational conglomerate Alstom is to decide whether to deposit 3 million dollars to guarantee the execution of the high-speed train project or abandon it. If the power and transport conglomerate were to abandon the project, the government would be forced to pay back 16 million dollars to the French-based company or go to trial.

According to the deal signed in April 2008, Alstom was imposed a monthly 3 million dollars deposit in order to maintain the project plan. The payments were punctually made until last December, when the Fernández de Kirchner's administration decided to suspend it until the first semester of 2011. However, Alstom would have decided not only to maintain the payments in the future, but also to demand the payments already made throughout 2010. 

The government claims its decision entails that Alstom won't have to pay 3 million dollars again, since the payment exemption was a measure implemented by the Executive branch. However, the conglomerate fears about eventual problems with eventual moneylenders, considering the construction never kicked off.

In order to carry out the project, Alstom implemented a complex financial engineering which entailed a long-term credit granted by French bank Netixis and Argentine security bonds. The total project was estimated to cost 1.35 billion dollars. In view of the financial and inflationary cost, it would reach 3.8 billion dollars.

The above-mentioned financial scheme was not implemented due to the international financial crisis and strong internal criticism. The high funding rate linked to the Argentine security bond to be issued represented another obstacle, according to Alstom.


Fears

Meanwhile, the deposit paid by Veloxia consortium (Alstom, Lecsa and Emepa) was essential. The 30-year loan included seven years of grace. Veloxia was supposed to construct the high-speed train in that period of time. The consortium fears that the project falls short.

Alstom would claim for a 16 million dollar refund in terms of "bid bond." In the next few days, the Argentine government is to decide whether to continue the project or not. The Fernández de Kirchner's administration is also to plan how to afford the payment.


The project was announced in 2008 and aimed to cover 320 kilometres by linking Buenos Airesb with the city of Rosario. Each ticket was estimated to cost 600 Argentine pesos (nearly 149 American dollars).



Translated by Jimena Gibert